Credit Card Limit: a Measure of Your Creditworthiness

When you receive a credit card, the card issuer will have set you a credit limit. It is the maximum amount of money you are allowed to spend on your plastic. The credit limit is based on the information from your credit report and an application form. Credit companies take into consideration your level of income, current employment, payment history and other factors.

Different credit companies can have different measures to evaluate your creditworthiness. And that's why one issuer may offer you a plastic with $5,000 credit limit and another issuer may offer you a plastic with $7,000 credit limit.

Most people want to get a high credit limit because it can be a great advantage. It gives you flexibility for purchases and a lot of spending power. It can even increase your credit score because your debt/available credit ratio will be lower.

Typically, the better your score, the higher your credit limit will be. So, if you have a big credit limit, it means that you have proved to be a trustworthy and responsible customer. Some issuers can give you a big credit limit initially or increase it gradually if you manage the debt well. So, everybody can increase their credit limit by making on time payments and not overspending.

High Credit Limit for Excellent Credit

Having an excellent credit gives you numerous benefits. You can choose the best credit cards with lowest rates, no annual fees, attractive reward programs and, of course, high credit limits.

Credit companies use high credit limits as a loyalty-building tool. The competition in a finance industry is high, so the more benefits they can offer to the people with excellent or good credit, the more responsible and trustworthy clients they will get. If you one of customers whose FICO score is above 750, receive our congratulations. You will have access to the maximum credit limit the issuers can offer.

Big credit limit allows you to have just one credit card and make all your expenses on it. So it's easier to keep track of your monthly spending if you receive only one statement with all your expenditures on it. Moreover, you will be able to earn more rewards with spending on one plastic. Another advantage is that you can take care of unforeseen large expenses just in case it comes to it.

However, keep in mind that having a high credit limit is not a signal to use all of your available credit. By doing that you can exceed your credit limit and hurt your perfect FICO score. "High limit" does not stand for the "unlimited". Just because you have more spending power does not mean that you should use your credit line completely. All large purchases should be planned. Do not spend your funds on the plastic just because you can. By doing this you can turn the "pro" of having a high credit limit into an undesirable "con".

No Pre-Set Limit Credit Cards

Having a high credit limit gives you a lot of spending power. Having no pre-set credit limit gives you unlimited spending power. It can be a great advantage: you can make as many purchases as you can afford. The key is to manage your expenses properly. Having no-preset limit doesn't mean that you can go and buy everything. Vice versa, now you need to be more careful and smart because it is you who set credit limit.

Having no pre-set limit can be tricky. There is no credit limit to report, so most card issuers report your highest balance as a credit limit to calculate your credit utilization. For example, if the cardholder has a $20,000 balance one month, that becomes his credit limit. If you carry little debt it can seem that you are close to being overextended (100% utilization ratio). That will not play into your hands. The way out is to make a huge charge on the card. Thus, if the card company indeed reports the highest balance as a credit limit of your no pre-set limit card, the charge will be considered as a high limit.

So, even though no pre-set limit credit cards give you more freedom and flexibility, you need to take into consideration all their features to make a right decision. Don't be scared to apply for a no pre-set limit card if you are a responsible customer.

Immediate Credit Card Care Service

If you have a question about any product or product feature, or if you need free advice from a credit expert, use our Immediate Credit Card Care Service. Ask a question, or look through previously answered questions. Either way, we are happy to help you learn about the important facts concerning credit cards.

Since each person’s situations are different, we can just give you a couple things to consider when choosing what is best for you. First of all, you need to know your credit score. A card with credit history requirements matching yours is what is best for you! Then you should understand your needs, know your habits and budget, determine your priorities – low interest rate on purchases or balance transfers, long introductory period, guaranteed approval, no annual fee, cash back, frequent flyer miles, hotel rewards, instant approval, high credit limit, etc. Choose what is best for your individual situation. For example, long 0% intro APR won’t be the main determining factor, if you usually pay off in full each month, and no annual fee or cash back rewards will be more beneficial for you. Visit Best Credit Cards page of our site with best offers for consumers with different credit scores and needs.

» See all Best Credit Cards FAQs